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not for the action of the Government in adopting such disastrous
measures as a note issue for the means of raising money. A note
issue, when used for such a purpose offers no security to the note
holders and simply means forced borrowings from unwilling subjects.
If the Government recognised the obligation of keeping an adequate reserve against the issue, this system of raising money could hardly be resorted to, as the difference between the amount of
notes in circulation and the amount held in coin necessary to establish confidence and ensure payment on' demand, would not be
sufficient to make the operation attractive to the Government.
It is only the totally unsound basis of the whole system
that has led to the issue of these notes and if the Government
continues the tactics of forcing the public to accept unsecured
notes, serious trouble must ensue.
The value of these notes which at the begining of the year was 74% discount compared to Hongkong currency (i.e. Hongkong notes) has fallen to over 35% discount at date. This in itself is sufficient to show how seriously trade is being handicapped.
Another important point which adds to the feeling of insecurity about the note issue is the possibility of forgeries the notes for the new Government were printed in Shanghai and it seems quite probable that sufficient precautions may not have been taken to make forgeries difficult or even to prevent genuine but unnumbered notes from going astray. The foregoing is of course only surmise but this feeling exists amongst the Chinese.
Chinese Merchants in Canton in contracting for goods have to pay the Hongkong importer in Hongkong currency notes and are naturally unwilling to enter into fresh commitments so long as there is a possibility of r their being forced to accept in- -convertible notes at an arbitrary value, in payment of goods sold. It means the introduction of an element of great uncertain- -ty into the most important branch of the transaction i.e. the difference in values of the money they receive and the money they have to pay away. The prices of commodities readily adjust them- -selves to altered conditions of a permanent nature but when
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